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Thursday, December 13, 2012

Perspective—Jurisdictional Arbitrage

People around the world are looking for opportunities to vote with their feet. Some would like to start a venture in an environment free of corruption. Others would like simply to practice their religion without fear. And what about those protecting their businesses from strangling regulations? Their savings from punishing taxation? Their children from failing school systems?

Predatory governments cover great swaths of the earth. So competitive governance is about neither idealism nor perfection. It’s about the fact that some social operating systems are better than others.

In other words, there are still places where the State still more or less protects good institutions—the “rules of the game”—better than others. The term for this is “jurisdictional arbitrage.” The idea is that you’ll probably increase your chances of success if you move from one place to another. For example, people are moving from California to Texas because the overall business climate, while certainly not perfect, is better in the Lone Star State. Free Staters find lower taxes and a love of liberty in New Hampshire. Migrants come to the United States from Mexico because America’s rules still give rise to more opportunities overall, compared to those of its southern neighbor.

This sets people to thinking: What if you could transplant good rules to countries with really bad rules? Or what if you could experiment with new rules by creating new nations somewhere?

An intrepid group of freedom-minded entrepreneurs led by Michael Strong recently got close to founding a “free city” in Honduras. And seasteaders are working out how to build lives in the one place on Earth not already occupied by the State.

The Honduran project met with a setback. Still, we should remain hopeful. There are plenty of precedents for free cities. Hong Kong and Singapore, though their legal systems were byproducts of imperialist powers, have thrived due to relatively good institutions (and decent helpings of benign neglect). So how can we create new opportunities for exit from inferior systems?

If the benefits of working on the open water outweigh the “Ocean Tax”—that is, the costs associated with life on the sea—people may start moving there. We want to explore this idea, because a pragmatic future is going to involve creating new escape valves for liberty—that is, new systems of law to compete with more sclerotic and venal systems.

We should also keep our eyes to the heavens. The private space industry is burgeoning. Will it be possible for humanity to create new civilizations on the moon, or on Mars?

It’s not even necessary that all systems of rules attach to territory. The fact that laws link to the land comes from a human past in which travel was hazardous and forming new communities—or changing from one to another—was fraught with peril (to say nothing of the layers of conquest and reconquest by warring groups with different systems of rules). But might the next phase of human social evolution come in divorcing a great many of the rules we live by from territories? Might new technologies allow us to “exit” bad systems—like fiat currencies—without having to leave our homes?

A right of exit is a check on power. But at present, exiting one system to enter another usually seems like moving from the plantation of a harsh master to that of a gentler one. Even so, an exodus can be a potent driver of institutional change. After all, it’s more difficult to prey on people when they are no longer around. This issue of The Freeman tells the stories of people trying to create new institutions. Even when they fail, they provide inspiration.

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The seas might be the best remaining option for those seeking escape from State overreach. Ivan Osorio describes seasteading, pirate radio, and the prospects for voting with your boat when there's nowhere left to go with your feet.

Honduran REDs seemed like the best bet for testing out free-cities concepts, Tom Bell says, but the Honduran Supreme Court recently put the kibosh on them. Where does that leave the free-cities movement? Bill Walker argues they have an answer in New Hampshire.

The development of private spaceflight might actually turn space into a frontier, final or not. We interview Lee Valentine of Princeton and XCOR Aerospace about space development’s exciting growth.

Eschewing some of the trappings of modern technology during childbirth is every woman's right, but, says Mike Reid, it's by no means more "natural."

If you live in Illinois, the school bus could be bringing union intimidation to a town near you. Charles Baird looks at freedom of association and unionization in the busing business.

In honor of FEE founder Leonard Read, and in hope of a better economic future, the Competitive Enterprise Institute (CEI) has released a new short film adaptation of “I, Pencil.” Nicole Ciandella says its message is as timely as ever.

Arguments that money is a creature of the State are not only wrong, they're dangerous. Alex Salter explains how, perhaps more than anything else, money is the prime example of Hayek's spontaneous order.

Frank Norris’s 1899 novel McTeague is one of the great neglected masterpieces of American Realist literature. It's also, according to Sarah Skwire, a useful reminder that “realist literature” does not mean literature that is exactly like real life.

Technological progress can lead to some scary times. Fortunately, says Luca Gattoni-Celli, it also places an unprecedented amount of power in the hands of ordinary people.

Periods of rapid technological progress allow a few enterprising individuals to bring efficiency gains to very large numbers of people. That increases income inequality, Dwight R. Lee says, but who would want to dispense with the improvements that produced it?

We introduce several new columnists this month. Editor Max Borders explains how progressivism remains authoritarian even when the word “peer” is added—as well as how network libertarianism is an altogether different beast; Doug Bandow explains that liberty can’t be separated into “economic” and “everything else”; and Jeffrey Tucker uses his GPS to find some important—and exciting—lessons about private innovation.

Our book reviewers examine the private provision of justice and women’s crucial contributions to human liberty.

The Freeman is the flagship publication of the Foundation for Economic Education and one of the oldest and most respected journals of liberty in America. For more than 50 years it has uncompromisingly defended the ideals of the free society.

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